TSX: IAE
Not for Distribution to U.S. Newswire Services or for Dissemination in
the United States
Ithaca Energy Inc.
Operations Update & 2014 Outlook
15 January 2014
Ithaca Energy Inc. (TSX: IAE; LSE: IAE) ("Ithaca" or the "Company")
provides an operational update and guidance on its planned 2014
production and capital expenditure programme.
Highlights
* Total pro-forma 2013 production in line with prior guidance at
approximately 13,000 barrels of oil equivalent per day ("boepd"); this
reflects inclusion of full year production from the assets acquired as
part of the Valiant Petroleum plc ("Valiant") acquisition, which
completed on 19 April 2013.
* 2014 production is anticipated to be in the range of 11,000 to 13,000
boepd, approximately 95% oil.No production from the Greater Stella
Area ("GSA") hub is incorporated in the guidance range.
* First hydrocarbons are anticipated from the GSA hub at the end
of 2014, resulting in net initial annualised production for the
Company of approximately 16,000 boepd.
* 2014 capital expenditure is anticipated to total $295 million,
reflecting investment in execution of the GSA development and a number
of production enhancement activities.
* Net drawn debt at 31 December 2013 of $348 million (excluding
$33 million drawn down on the Norwegian tax rebate facility).
* In line with the Company's strategy to restructure its Norwegian
portfolio, a licence swap has been executed with Tullow Norge AS
("Tullow") to exchange the Company's non-operated interests in two
Barents Sea licences, including the licence containing the
Langlitinden well, for a non-operated position in a Tullow operated
Norwegian North Sea licence.
2013 Production
Total pro-forma production in 2013 was approximately 13,000 boepd, 95%
oil; this reflects inclusion of full year production from the assets
acquired as part of the Valiant acquisition, which completed on 19
April 2013.
Average production in the fourth quarter of 2013 was approximately
11,300 boepd, 96% oil.
2014 Operations Outlook
In 2014 the Company's operational focus will be on the delivery of
first hydrocarbons from the Stella field and investment in production
enhancement activities.
Greater Stella Area
As reported in the recent GSA operational update, the focus of the 2014
work programme is on drilling of the third and fourth Stella field
development wells and completion of the subsea infrastructure
installation and FPF-1 modification programmes. First hydrocarbons are
anticipated from the GSA hub at the end of 2014, resulting in net
initial annualised production for the Company of approximately 16,000
boepd.
Causeway Area
Three key production enhancement activities are to be completed in the
Causeway Area during 2014.
Operations are progressing on plan to enable the start-up of electrical
submersible pump ("ESP") support for the Causeway and Fionn production
wells. The electrical plant has been installed on the platform and the
focus is now on hook-up and commissioning activities to enable start-up
of the ESPs in the first half of 2014.
The work required to enable the start-up of water injection on the
Causeway field in the first half of the year is progressing well, with
the water injection riser connecting the subsea infrastructure for the
well to the host platform having been successfully installed in
November 2013. The outstanding work to be finished is the hook-up and
commissioning of the injection riser and platform pipework.
Operations are underway on the sidetrack of the Fionn field production
well, delivery of which is forecast to substantially boost production.
Harsh weather in December and January has resulted in operational
delays, with the well now expected to be in production in the second
quarter of the year.
Dons
The joint venture is planning to drill a new infill production well on
the Don Southwest field during 2014 as part of the expected longer term
drilling programme designed to maximise production and reserves
recovery from the field. Drilling rig contract negotiations are being
finalised, with the potential for production to commence in the first
half of the year.
Athena
It is intended that a workover will be performed on the "P4" well
during the second half of 2014 in order to replace the failed ESP
package in the well. The process for securing a drilling rig is
underway.
Cook
An approximate eight week shutdown of the Shell-operated Anasuria
floating production, storage and offloading vessel ("FPSO") is planned
for the second half of 2014 to enable vessel life extension works to be
undertaken. A new production riser for the Cook field will also be
installed during the shutdown. These works are focused on improving
the operational efficiency and longevity of the facilities, thereby
enabling the full potential of the field to be delivered in the coming
years.
The new "4D" seismic data acquired over the field in 2013 will be
processed and interpreted over the course of the year. This will
improve the understanding of reservoir sweep, with the objective of
identifying the potential for drilling a further well on the field.
Handcross
Operations commenced at the end of December 2013 on the exploration
well being drilled on the Handcross prospect in the West of Shetlands
sector of the UK Continental Shelf. As a result of previously
announced farm-out transactions, the Company is fully carried for its
forecast share of the well cost.
Norway
A licence swap agreement has been executed with Tullow that will result
in the transfer to Ithaca of a 10% non-operated interest in licence
PL507 in the Norwegian North Sea in exchange for its non-operated
interests in licences PL659 (5%), which contains the Langlitinden
prospect, and PL610 (12.5%), both of which lie in the Norwegian sector
of the Barents Sea.
Licence PL507 contains the Lupus prospect, which is scheduled to be
drilled around mid-2014 using the Borgland Dolphin semi-submersible
drilling rig, and lies within approximately 40 kilometres of the
existing Oseberg field facilities. Following completion, which is
subject to normal regulatory consents, the licence partners in PL507
will be Tullow (70%, Operator), Explora (20%) and Ithaca (10%).
2014 Production Guidance
The Company's 2014 net production is anticipated to be in the range of
11,000 to 13,000 boepd, approximately 95% oil. No production from the
GSA hub is incorporated in the guidance range. The range reflects the
dependency upon the timing of the various production enhancement
activities being executed during the year.
The anticipated schedule of 2014 production enhancement activities
means that production volumes are forecast to be weighted towards the
second half of the year. Notably, production during the first quarter
is estimated to be below the full year range driven primarily by an
unplanned shutdown of the Cook field that is currently on-going to
repair the gas export compressor on the Anasuria FPSO host facility.
It is anticipated that the duration of the repairs will result in the
field being re-started in February 2014.
As in previous years, the third quarter of the year is scheduled to be
the period in which the main planned infrastructure maintenance
shutdowns take place. Planned shutdowns are estimated to result in an
overall production deferral of around 1,000 boepd in 2014.
The production forecast anticipates that 2014 will be the last year of
production from the Beatrice area facilities. Under the terms of the
Beatrice facilities lease agreement executed with Talisman in 2008,
Ithaca is able to re-transfer the facilities to Talisman for
decommissioning.
2014 Capital Expenditure
The Company anticipates net 2014 capital expenditure to total
approximately $295 million.
* $185 million relates to the GSA development.This reflects
deferment of $60 million of capital expenditure that was previously
anticipated for 2013 into 2014, together with $35 million of pre-first
hydrocarbons cost growth resulting from the delay to start-up of
production and the impact on drilling of the recent harsh weather in
the UK North Sea.
* $100 million relates to investments on the existing producing asset
portfolio; $70million of drilling on the Fionn, Don Southwest and
Athena fields and $30 million on enhancing the Cook and Causeway field
facilities.
* $10 million net of the 78% Norwegian tax refund relates to the
Company's Norwegian portfolio.
Business Development
During 2014, the Company will continue to seek opportunities to enhance
the value of its existing UK portfolio. The Company's growth strategy
remains focused on securing appraisal, development and production
opportunities with the potential to utilise the organisation's core
subsurface, commercial and project management skills to increase and
accelerate shareholder value.
Net Debt
Net drawn debt at 31 December 2013 was approximately $348 million.
This excludes $33 million drawn down as of the same date on the
Company's Norwegian tax rebate facility, which serves to accelerate the
payment of the 78% tax rebate paid by the Norwegian government on
exploration and appraisal activities.
The Company has in place $710 million of long term senior bank debt
financing facilities, which comprise a $610 million reserve based
lending facility and $100 million corporate facility.
Additional Information
An updated corporate presentation is available on the Company's website
www.ithacaenergy.com.
The Company intends to publish its full year 2013 accounts and year-end
reserves, as evaluated by Sproule International Limited, on 31 March
2014.
- ENDS -
Enquiries:
Ithaca Energy
Les Thomas [email protected] +44 (0)1224 650 261
Richard Smith [email protected] +44 (0)1224 652 172
FTI Consulting
Edward Westropp [email protected] +44 (0)207 269 7230
Georgia Mann [email protected] +44 (0)207 269 7212
Cenkos Securities
Neil McDonald [email protected] +44 (0)131 220 6939
Beth McKiernan [email protected] +44 (0)131 220 9778
RBC Capital Markets
Tim Chapman [email protected] +44 (0)207 653 4641
Matthew Coakes [email protected] +44 (0)207 653 4871
Notes
In accordance with AIM Guidelines, John Horsburgh, BSc (Hons)
Geophysics (Edinburgh), MSc Petroleum Geology (Aberdeen) and Subsurface
Manager at Ithaca is the qualified person that has reviewed the
technical information contained in this press release. Mr Horsburgh
has over 15 years operating experience in the upstream oil and gas
industry.
References herein to barrels of oil equivalent ("boe") are derived by
converting gas to oil in the ratio of six thousand cubic feet ("Mcf")
of gas to one barrel ("bbl") of oil. Boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1
bbl is based on an energy conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead.
Given the value ratio based on the current price of crude oil as
compared to natural gas is significantly different from the energy
equivalency of 6 Mcf: 1 bbl, utilising a conversion ratio at 6 Mcf: 1
bbl may be misleading as an indication of value.
About Ithaca Energy
Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) is a North Sea oil and gas
operator focused on the delivery of lower risk growth through the
appraisal and development of UK undeveloped discoveries, the
exploitation of its existing UK producing asset portfolio and a
Norwegian exploration and appraisal business targeting the generation
of discoveries capable of monetisation prior to development. Ithaca's
strategy is centred on generating sustainable long term shareholder
value by building a highly profitable 25kboe/d North Sea oil and gas
company. For further information please consult the Company's website
www.ithacaenergy.com.
Not for Distribution to U.S. Newswire Services or for Dissemination in
the United States
Forward-looking statements
Some of the statements and information in this press release are
forward-looking. Forward-looking statements and forward-looking
information (collectively, "forward-looking statements") are based on
the Company's internal expectations, estimates, projections,
assumptions and beliefs as at the date of such statements or
information, including, among other things, assumptions with respect to
production, drilling, construction times, well completion times, risks
associated with operations, future capital expenditures, continued
availability of financing for future capital expenditures, future
acquisitions and cash flow. The reader is cautioned that assumptions
used in the preparation of such information may prove to be incorrect.
When used in this press release, the words "anticipate",
"continue","estimate", "expect", "may", "will", "project", "plan",
"should","believe", "could", "target" and similar expressions, and the
negatives
thereof, whether used in connection with operational activities,
drilling plans, production forecasts, budgetary figures, potential
developments or otherwise, are intended to identify forward-looking
statements. Such statements are not promises or guarantees, and are
subject to known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from those
anticipated in such forward-looking statements. The Company believes
that the expectations reflected in those forward-looking statements and
are reasonable but no assurance can be given that these expectations,
or the assumptions underlying these expectations, will prove to be
correct and such forward-looking statements and included in this press
release should not be unduly relied upon. These forward-looking
statements speak only as of the date of this press release. Ithaca
Energy Inc. expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statement contained herein to reflect any change in its expectations
with regard thereto or any change in events, conditions or
circumstances on which any forward-looking statement is based except as
required by applicable securities laws.
Additional information on these and other factors that could affect
Ithaca's operations and financial results are included in the Company's
Management's Discussion and Analysis for the year ended December 31,
2012, and the Company's Annual Information Form for the year ended
December 31, 2012 and in reports which are on file with the Canadian
securities regulatory authorities and may be accessed through the
Company's profile on the SEDAR website (www.sedar.com).
This information is provided by RNS
The company news service from the London Stock Exchange
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